April 2008

Most studies of unemployment benefits examine benefit levels or lengths of payment, but how benefit schemes are administered is also important. This column reports the results of a randomised control trial conducted in Hungary, which show that closer monitoring of some benefit recipients shortened their unemployment spell.

Academic citations are a popular measure of research output, but they also serve strategic and social functions. This column examines the importance of scholars promoting their own research by surveying the citation counts of prominent economists who passed away prematurely.

The financial turmoil has been worsening as lagged adjustment processes play out. This column outlines economic dangers that may arise as they unwind, including a scenario in which the United States suffers extended stagflation.

Economic geography models suggest various relationships between innovation and spatial concentration, from benefits of diversity in cities to agglomeration gains in specialised industrial parks. This column summarises empirical research that uses these theories to explain various stages of “regional lifecycles.” An important result is that supra-national EU policymakers are poorly positioned to address regions’ differing needs.

Though policymakers show great concern for market power when discussing antitrust policy, they neglect it when designing trade policies. This column summarises recent empirical research showing that some trade barriers impose significant costs on consumers by substantially raising the market power of domestic firms.

Recent housing finance innovations have changed the relationship between house prices and the business cycle. This column suggests that these changes amplify spillovers from the housing sector to the rest of the economy and recommends that monetary policy respond more aggressively to the housing market.

Rising food prices are hurting many poor people, but they are helping poor agricultural producers. Food price volatility, on the other hand, is bad for everyone. This column explains poor people’s need for food price variability insurance.

Child labour remains a pervasive problem across the globe. This column discusses the nature of child labourers’ jobs, earnings, motivations, and well-being during the British Industrial Revolution. Their historical experience offers lessons for today’s policymakers.

Unemployment has fallen greatly in Europe during the last decade, yet governments creating millions of jobs are losing elections. The source of public dissatisfaction is that the price of lower unemployment is greater employment risk. This column proposes further labour market reforms to address the problem.

US antitrust authorities block very few mergers. This column presents estimates of the consumer price impact of five large mergers that were allowed. Prices increased, providing one piece of evidence to support those who say US antitrust authorities are too acquiescent.

Current prospects for liberalisation of barriers to international trade and migration seem dim. In this column, the authors of the Copenhagen Consensus paper on global economic integration outline the magnitude of the gains that politicians are opposing.

Barack Obama attracted attention recently by describing small-town Americans who were “bitter” at economic prospects who “cling to guns or religion’’ in frustration. But an opposite view, 'post-materialism', suggests that, as people and societies get richer, their concerns shift from mundane bread-and-butter issues to cultural and spiritual concerns.

Unlike most developing economies, China’s educational policy focuses on upgrading higher education. This column summarises the major transformation occurring in China – including nearly a quintupling in enrolments – and highlights its implications for the global economy.

Immigration of less educated, younger Eastern Europeans and North Africans to Western Europe would economically benefit its educated and older population. This column, summarising research on immigration effects in Germany, suggests that, to fully reap the benefits from immigration, Western Europe should make its labour markets more competitive and accessible to outsiders (immigrants) and its welfare state more selective.

US climate change policy relies on corporations voluntarily reducing their greenhouse gas output. But recent research shows that pledging to cut carbon is bad for business, which is why so few firms take such voluntary measures. Reducing carbon emissions will require regulation.

Europe’s jobs outlook has brightened over the past decade. Recent research suggests that about half the rise in job creation is due to labour market reforms, but much of the rest is due to changing social norms concerning female and immigrant labour force participation. But what’s good for European job creation seems to be bad for labour productivity growth – a trade-off that European policymakers must be willing to acknowledge and address.

Many studies have shown fiscal policy to be pro-cyclical, leading some analysts to conclude that policymakers are incompetent or ill-intentioned. But new research using real-time data – the information policymakers had when making their fiscal policy decisions – shows that policymakers are merely misinformed.

The rising price of oil has been accompanied by nationalisations of oil assets, and the relationship is no mere coincidence. Recent research shows that higher oil prices trigger expropriations, particularly in countries with weak political institutions.

Institutions play a central role in determining trade flows. Evidence from the age of high imperialism suggests that political relationships can be as powerful at dictating trade flows as geography and other institutional factors, such as currency unions or widespread fixed-exchange rate regimes like the gold standard.

The nature of the ongoing financial turmoil that began in August 2007 has rendered traditional monetary policy responses ineffective. This column summarises the US Federal Reserve’s response to the crisis.

Steven Levitt has famously hypothesised that the legalisation of abortion reduced US crime. Recent research shows that UK data reject that story. But there may be a relationship between abortion rates and crime rates, and this column introduces a new hypothesis to guide research on the social impact of abortion.

Iceland’s economic turbulence sounds like a familiar macroeconomic story – a credit expansion fuelled excessive borrowing and spending. But there are unfamiliar details – an unusually large banking sector and a central bank unable to serve as a credible lender of last resort – that raise concerns. Nevertheless, Iceland should be able to weather the current turmoil.

Should EU takeover regulators force those buying a block of shares to offer the same price to all shareholders? Evidence from the United States, where private negotiations may be exclusive, warns against imposing such a rule.

Recent studies have shown that globalisation creates winning and losing firms within the same sector. This column summarises evidence from Italy describing important differences between domestic firms and offshorers. Firms going abroad are larger, but not all modes of offshoring are equal.

Across the EU, new asylum applications have fallen dramatically, which some governments attribute to their policy changes. New research shows that tougher policies are indeed deterring asylum seekers, though perhaps less than government ministers would like to claim.

Recent events have commentators discussing whether Iceland is in danger of an economic meltdown. This column examines the situation in detail, explaining the sources of today’s financial woes and why, despite serious need for reform, Iceland’s fundamentals are strong.

Voting behaviour seemingly confounds rational choice theory. But this column shows that voting can be perfectly rational, if voters are concerned with social benefits and not merely personal gains. Rationality and selfishness are not the same.

Financial supervision arguably failed to prevent today’s turmoil because it relied upon the very price-sensitive risk models that produced the crisis. This column calls for an ambitious departure from trends in modern financial regulation to correct the problem.

The UK retail sector’s performance has been disappointing compared to the United States, where significant productivity gains are attributed to greater dynamism. A number of analysts have blamed the UK’s woes on planning regulation and urged liberalisation. But the evidence presented in this column shows that the impact of planning regulation is overstated.

European economies catching up to the rest of the euro area suffer from higher inflation. The conventional structural explanation – the Balassa-Samuelson effect – doesn’t match the data, causing some to argue that cyclical effects must be driving economic differences. But the authors of CEPR Policy Insight 20 argue that structural changes – important improvements in product quality – may explain the phenomenon.

Serious scientists worry that feedback effects could - beyond some unknown “tipping point” - cause runaway warming with unforeseeable outcomes that would look like bad science fiction from today’s perspective. The continuing scientific uncertainty should make us more concerned, not less.